January 17, 2014

John Phillips is financial services director at Kinleigh Folkard & Hayward


The news that the Bank of England has finally hit its inflation target of 2% for the first time in 49 months will cheer many in the policy corridors of Whitehall.

It has probably killed any faint glimmers of an interest rate rise this year (if anyone really entertained such a thought) and quite possibly will have cemented any further move until well after the General Election.

This means there can be no imminent remortgage market, something the tighter lending environment of MMR might have struggled with anyway, and with a government focussed on economic good news more time for households to recover is a good thing.

Home moving however continues to grow at a good pace.

The end of last year saw the market up on most predictions and few are expecting this year to disappoint.

For brokers, the impact of the MMR should not be underestimated. A burgeoning economic recovery will be met with an ill-timed extension of the process of taking out a mortgage and very probably reduce the amount borrowers can raise.

The number of affordability checks carried out when clients apply for a loan will grow as lenders will be forced to delve deeper into borrowers’ financial situations before deciding whether to offer a mortgage

Although the end result may be more responsible lending, lenders may be cautious in the early days of the new rules until everyone feels comfortable about how the regulator will supervise the new regime.  

This brings me to house prices. If house prices continue to rise at the rate they did in 2013 it could make it even harder to get a home loan this year.

The double whammy of a recovering UK housing market and cautious lending environment may put the brakes on overheating areas but with foreign cash buyers still impacting the South East the government will be keen to ensure voters’ new found economic confidence is not so knocked that we start to feel less rich again.

After all, this has been a debt fuelled recovery and to sustain it people require debt.





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